De Blasio administration goes after Verizon for failing to deliver FiOS

Life may soon be getting harder for New York City's largest publicly traded company when it comes to dealing with one of its biggest customers—the city of New York.

The de Blasio administration is putting Verizon Communications on notice that business it used to do with city agencies will now go through City Hall, which could choose to block discretionary transactions if it deems the company a "bad actor." The move is aimed at pressuring the telecommunications giant to make good on its overdue promise to deliver broadband service citywide.

In a meeting at the end of June, Mayor Bill de Blasio told commissioners and agency heads they must inform the Department of Information Technology and Telecommunications of all major contract negotiations with Verizon and other service providers. The mayor's counsel, Maya Wiley, will issue final approval of any discretionary deal.

It's no small threat: Verizon's voice and data business for government agencies has totaled close to $650 million during the past five years, according to city estimates.

The edict reflects the administration's frustration with Verizon. An audit last month found the company had not lived up to its 2008 franchise agreement to make its fiber-optic cable-television service available to all New Yorkers.

The de Blasio administration's new protocol has been described by insiders as an attempt to keep Verizon from continuing with business as usual while failing to make good on its FiOS franchise commitments—or even acknowledging the shortcomings of its FiOS rollout.

Verizon, in a 30-page addendum to the audit report, disputed almost all its findings.

FiOS is of particular concern to the mayor because he has made universal broadband access a key component of his effort to reduce income inequality. The franchise agreement, reached during the Bloomberg administration, not only calls for the build-out of New York's lone citywide fiber-optic network, but aims to spur competition by bringing choice to neighborhoods currently served by a single cable television and high-speed Internet provider.

City officials say they are not making threats. But they want Verizon to know the game has changed.

"We'll treat Verizon fairly," said Ms. Wiley, who leads broadband strategy for the mayor. "But where we have the power to make decisions, we will make decisions that benefit good corporate actors. They have to demonstrate to us that they are good corporate actors if they want us to use our discretion in ways that benefit them."

The new approach also reflects how public the city's battles with Verizon have become. In a recent Wall Street Journal story, Anne Roest, commissioner of the Department of Information Technology and Telecommunications, cited reports she had received of Verizon competitors having trouble running fiber-optic cable through conduits the company controls in Manhattan, Brooklyn and Queens.

Broadband providers have long complained privately about the added costs of working with Verizon in the outer boroughs. In Manhattan, Verizon subsidiary Empire City Subway oversees the underground conduits, which providers say are costly and difficult to navigate. But Ms. Roest's comments appear to have been the first by a city official about the complaints.

Leecia Eve, Verizon's vice president for state government affairs and a former Cuomo administration official, said the company has received no complaints from providers about the conduits. She suggested that if they were unhappy, they should call Verizon.

More significantly, the city and Verizon seem further apart than ever on the central issues surrounding the 2008 agreement. The audit found Verizon hasn't even finished putting its fiber network in the ground—something the company said it had done by last November.

Verizon, in its rebuttal, said the city has changed the definition of what it means for the network to be completed, and lists uncooperative landlords and other difficulties getting access to buildings as the main challenges to bringing FiOS from the street into homes.

Veterans of franchise disputes say there's a long tradition to these disagreements.

"There is always a tension between the expectations of the city for performance, and what, on a business basis, franchise providers are able to deliver," said Kathryn Wylde, chief executive of the Partnership for New York City, a business advocacy group that counts Verizon as a member.

She noted that she is unable to get FiOS in her Bay Ridge, Brooklyn, neighborhood.

Verizon, too, insists the current disagreements are in many ways part of working with a longtime partner.

"I put the challenges we are facing right now within a much broader, multifaceted context," Ms. Eve said. "We have a very strong relationship with the city across the board."

She even put a happy face on the city's decision to erect a City Hall hoop that Verizon must jump through for every deal. "It's easier to have one point of contact," she said.

The greater pressure may be on City Hall, which has thrown down the gauntlet with the audit and needs to show it is not powerless against a corporate behemoth.

"We'll continue to talk with [Verizon]—as well as centralize our communications and look at the relationship holistically," Ms. Wiley said. "And look at all our options depending on how they respond."

Broadside on broadband

As if Verizon didn't have enough problems with its FiOS rollout and the de Blasio administration, the Working Families Party chimed in last week with an accusation that surely went overboard.

"For most New Yorkers, there isn't an alternative to unreliable Internet service," the union-backed party's Amy Witacco wrote in an email blast. "Verizon does have a cutting-edge fiber optic network called FiOS that breaks that monopoly, but for years they've been picking only the wealthiest neighborhoods in which to install it."

Even the city's harsh audit didn't make that claim. FiOS is unavailable in many pricey areas, while some poor sections have been wired. Verizon first connected Staten Island, a middle-class borough, because its above-ground wires and single-­family homes made the job easy.

A Working Families Party spokesman cited a study by CWA, a union at odds with Verizon, showing Verizon wired suburbs around Buffalo, Albany, Syracuse, Boston and Baltimore but not the cities themselves. New York City was not part of the study.

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